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U.S. Department of Justice Office of Justice Programs National Institute of Justice
The Threat of Russian Organized Crime
James O. Finckenauer and Yuri A.Voronin
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U.S. Department of Justice Office of Justice Programs 810 Seventh Street N.W. Washington, DC 20531
John Ashcroft Attorney General
Office of Justice Programs National Institute of Justice World Wide Web Site World Wide Web Site http://www.ojp.usdoj.gov http://www.ojp.usdoj.gov/nij 02-Inside 7/30/01 3:38 PM Page i
The Threat of Russian Organized Crime
James O. Finckenauer and Yuri A.Voronin
June 2001 NCJ 187085
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National Institute of Justice
James O. Finckenauer is director of the International Center of the National Institute of Justice, which is the research arm of the U.S. Department of Justice. He is on leave from the Rutgers University School of Criminal Justice, where he is a professor of criminal justice. Professor Finckenauer is the author or coauthor of six books as well as numerous articles and reports. His latest books are Russian Mafia in America (Northeastern University Press, 1998) and Scared Straight and the Panacea Phenomenon Revisited (Waveland Press, 1999).
Yuri A. Voronin served as a visiting international fellow with the National Institute of Justice from March 1, 1999, to March 1, 2000. At the time of his fellowship, he was both a full professor at the Urals State Law Academy and director of the Organized Crime Study Center at the Urals State Law Academy.
Portions of this report were prepared for the National Institute of Justice, U.S. Department of Justice, under grant number 1999ÐIJÐCXÐ0014 to Yuri A. Voronin with funds transferred from the U.S. Department of State. Points of view or opinions stated in this document are those of the authors and do not necessarily represent the official position or policies of the U.S. Department of Justice.
The National Institute of Justice is a component of the Office of Justice Programs, which also includes the Bureau of Justice Assistance, the Bureau of Justice Statistics, the Office of Juvenile Justice and Delinquency Prevention, and the Office for Victims of Crime. 02-Inside 7/30/01 3:38 PM Page iii
The Threat of Russian Organized Crime
CONTENTS
Introduction...... 1
Historical, Political, and Economic Aspects...... 3
Political and Economic Linkages ...... 7
The Legal and Law Enforcement Context...... 9
The Development of Organized Crime in the Urals ...... 10
Contemporary Issues Concerning Organized Crime in the Urals ...... 16
The Future of Organized Crime in the Urals...... 28
Notes ...... 30
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The Threat of Russian Organized Crime
INTRODUCTION A long smear of blood on the road marks the place where two masked men shot dead one of Russia’s most prominent industrialists . . . outside his house in the city of Yekaterinburg in the Ural Mountains. Oleg Belonenko, 51, managing director of Uralmash, the largest industrial company in Russia, had just got in this grey Volga car to go to work when two men in track- suits opened fire with pistols, hitting him in the head and his driver in the stomach. Both men died in hospital. Mr. Belonenko’s murder . . . once again shows the power and ruthlessness of criminal gangs who control large sections of Russia’s economy.1
n the decade since the collapse of the Soviet Union, the world has become the target of a new global crime threat from criminal organizations and criminal I activities that have poured forth over the borders of Russia and other former Soviet republics such as Ukraine. The nature and variety of the crimes being com- mitted seems unlimited—drugs, arms trafficking, stolen automobiles, trafficking in women and children, and money laundering are among the most prevalent. The spillover is particularly troubling to Europe (and especially Eastern Europe) because of its geographical proximity to Russia, and to Israel, because of its large numbers of Russian immigrants. But no area of the world seems immune to this menace, espe- cially not the United States. America is the land of opportunity for unloading crimi- nal goods and laundering dirty money. For that reason—and because, unfortunately, much of the examination of Russian organized crime (the so-called “Russian Mafia”) to date has been rather hyperbolic and sketchy—we believe it is important to step back and take an objective look at this growing phenomenon. Just what is this Russian Mafia? What does it look like? Where does it come from? What does it do? And how does it do it? We hope that through addressing these questions we can provide a context for assessing how much of a threat Russian crime might be to the United States—directly or indirectly—and how concerned we should be.
Let us begin by providing some context for our discussion. First, the reader should know that defining organized crime is a matter of some dispute among scholars and law enforcement specialists. That disagreement is heightened when the subject, as in this case, becomes transnational organized crime. We will not, however, venture into this controversy here. Instead, we will simply provide our own working definition of organized crime:
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Organized crime is crime committed by criminal organizations whose existence has continuity over time and across crimes, and that use systematic violence and corruption to facilitate their criminal activities. These criminal organizations have varying capacities to inflict economic, physical, psychological, and societal harm. The greater their capacity to harm, the greater the danger they pose to society.
As in the United States, there is no universally accepted definition of organized crime in Russia, in major part because Russian law (like U.S. law) provides no legal definition of organized crime. Analysis of criminological sources, however, enables one to identify some of its basic characteristics.2 These include organizational fea- tures that make Russian organized crime unique in the degree to which it is embed- ded in the post-Soviet political system. At the same time, however, it has certain features in common with such other well-known varieties of organized crime as the Italian Mafia. The latter has a complicated history that includes both cooperation and conflict with the Italian state. Much more than was ever the case with the Italian Mafia, however, Russian organized crime is uniquely a descendant of the Soviet state.
Russian organized crime has come to plague many areas of the globe since the demise of the Soviet Union just more than a decade ago. The transnational character of Russian organized crime, when coupled with its high degree of sophistication and ruthlessness, has attracted the world’s attention and concern to what has become known as a global Russian Mafia. Along with this concern, however, has come a fair amount of misunderstanding and stereotyping with respect to Russian organized crime. It is this combination that has stimulated our work on this report.
We want to try to clear up some of the misunderstanding and misinformation and also to try to ensure that where there is concern, it is well-founded. To do so, we will trace some of the contextual features—historical, political and economic—of Russian organized crime. We will look briefly at moves by the Russian government since 1991 to cope with its crime problem. Then we will present a case study of organized crime in the Urals region of Russia. It was there that the killings described in our opening vignette occurred. As with any case study, our purpose in focusing on the Urals is to capture and examine in microcosm what has otherwise been explored mostly in macrocosm and purely descriptive forms. We will conclude with a brief discussion of the real and potential impacts of Russian organized crime on the United States.
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HISTORICAL, POLITICAL, AND ECONOMIC ASPECTS Organized crime is a historical phenomenon that has existed for hundreds, and in some cases, for thousands of years in many different societies. But interestingly, unlike common crime, true organized crime as we define it is not present every- where. Certain characteristics seem to differentiate countries burdened by organized crime from those that are not. Some of these characteristics appear simply to be coexisting conditions, whereas others are facilitators, and yet still others could actu- ally qualify as causes of organized crime.
The general level of crime in a country is an apparent primary condition for organ- ized crime. High-crime countries are more likely than low-crime countries to have organized crime. This is because organized crime and common crime are influenced by many of the same factors. Crime is related to the degree of urbanization and industrialization and to social disorganization—factors that produce criminal oppor- tunities and thus more crime. Organized crime is especially likely to be more preva- lent in cities and countries with advanced levels of economic development, the history of the Mafia in rural Sicily to the contrary notwithstanding. Economic devel- opment, industrialization, and urbanization both stimulate and facilitate demand for goods and services. These include goods and services that are illegal (such as drugs), regulated (such as cigarettes or guns), or simply in short supply. When there is a plentiful supply of a legal, unregulated product, there is no incentive for organized crime to become a supplier. When we have the opposite condition, however, then we typically see organized crime rising to fulfill the unmet demand. This demand may be for drugs, firearms, or sex workers, or it may be for a service such as protec- tion or resolving disputes when there is no acceptable legal means of doing so.
The nature of the criminal opportunities available in a particular place also influ- ences the presence of organized crime. The extent to which particular criminal opportunities can best be exploited or, perhaps, can only be exploited by criminal organizations also helps explain the presence or absence of organized crime. Some crimes can be committed quite easily by criminals acting alone or in an unorganized manner, but others cannot. The latter is especially true of crimes that are committed across national borders.
With respect to organized crime, certain geographical or infrastructure characteris- tics, such as the presence of seaports, international airports, strategic border loca- tions, rich natural resources, and so on, provide special criminal opportunities that
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can best be exploited by criminals who are organized. More so than common crime, organized crime is fed by the presence of ethnic minorities who furnish a ready supply of both victims and the offenders to victimize them. Organized crime also thrives in environments characterized by a relatively high tolerance of deviance and a romanticization of crime figures, especially where government and law enforce- ment are weak or corrupt (the history of the Sicilian Mafia illustrates this).
We are not suggesting that any of these factors are causes of organized crime but, rather, that they create a favorable climate for its growth. The fundamental causes of organized crime are actually quite simple—greed and demand. The greed for money and power on the part of some is often (although not always) met by the demand of others for goods and services that are illegal or unavailable.
Russia is one of those unfortunate countries that has the receptive environment in which organized crime thrives. Organized crime is deeply rooted in the 400-year history of Russia’s peculiar administrative bureaucracy, but it was especially shaped into its current form during the seven decades of Soviet hegemony that ended in 1991. This ancestry helps to explain the pervasiveness of organized crime in today’s Russia and its close merger with the political system. Organized crime in Russia is an institutionalized part of the political and economic environment. It cannot, there- fore, be fully understood without first understanding its place in the context of the Russian political and economic system.
Unlike Colombian, Italian, Mexican, or other well-known forms of organized crime, Soviet organized crime was not primarily based on ethnic or family structures. To help understand the difference, we can look to the history of organized crime in the United States for a contrasting portrait. As a number of scholars have pointed out,3 organized crime provided a “crooked ladder of upward mobility” for some immi- grants to the United States. Certain immigrants—sharing a common ethnicity, cul- ture, and language, and, being on the bottom rung of the socioeconomic ladder, either having legitimate opportunities for advancement closed to them or rejecting the opportunities that were available—have turned to crime, and specifically organ- ized crime, to get ahead. This crooked ladder for ethnic immigrants was not the driving force behind organized crime in the U.S.S.R. Instead, the Soviet criminal world—except in the Caucasus (e.g., Armenia, Chechnya, Georgia) and Central Asia (e.g., Uzbekistan)—was built around a vertical dependency of individuals whose coalescence into criminal groups was driven solely by their mutual participation in criminal activities. The connection among these professional criminals, in other words, was economic, rather than ethnic or familial.
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Because organized crime is made up of criminals who conspire to carry out illegal acts, a degree of trust is necessary among those criminals. Coconspirators must be able to trust that their collaborators will not talk to the police or to anyone who might talk to the police, and that they will not cheat them out of their money. A shared ethnicity, with its common language, background, and culture, has historical- ly been a foundation for trust among organized crime figures.
Yet ethnicity did not play the significant role in Soviet organized crime that it played in the United States. Instead, the Soviet prison system, in many ways, ful- filled functions that were satisfied by shared ethnicity in the United States. In the Soviet Union, a professional criminal class developed in Soviet prisons during the Stalinist period that began in 1924—the era of the gulag. These criminals adopted behaviors, rules, values, and sanctions that bound them together in what was called the thieves’ world, led by the elite “vory v zakone,” criminals who lived according to the “thieves’ law.”4 This thieves’ world, and particularly the vory, creat- ed and maintained the bonds and climate of trust necessary for carrying out organ- ized crime.
Organized crime in the Soviet era consisted of illegal enterprises with both legal and black-market connections that were based on the misuse of state property and funds. It is most important to recognize that the blurring of the distinction between the licit and the illicit is also a trademark of post-Soviet organized crime that shows its ancestry with the old Soviet state and its command-economy system. This, in turn, has direct political implications. The historical symbiosis with the state makes Russian organized crime virtually an inalienable part of the state. As this has contin- ued into the present, some would say it has become an engine of the state that works at all levels of the Russian government.
Contemporary Russian organized crime grew out of the Soviet “nomenklatura” system (the government’s organizational structure and high-level officials) in which some individual “apparatchiks” (government bureaucrats) developed mutually beneficial personal relationships with the thieves’ world. The top of the pyramid of organized crime during the Soviet period was made up of the Communist Party and state officials who abused their positions of power and authority. Economic activities ranged across a spectrum of markets—white, gray, black, and criminal. These mar- kets were roughly defined by whether the goods and services being provided were legal, legal but regulated, or illegal, and by whether the system for providing them was likewise legal, legal but regulated, or illegal. The criminals operated on the ille- gal end of this spectrum. Tribute gained from black markets and criminal activities
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was passed up a three-tiered pyramid to the nomenklatura, and the nomenklatura itself (some 1.5 million people) had a vast internal system of rewards and punish- ments. The giant state apparatus thus not only allowed criminal activity, but encour- aged, facilitated, and protected it, because the apparatus itself benefited from crime.
These sorts of relationships provided the original nexus between organized crime and the government. From these beginnings, organized crime in Russia evolved to its present ambiguous position of being both in direct collaboration with the state and, at the same time, in conflict with it.
Specialists in Russian organized crime date the appearance of the first organized criminal groups in the former Soviet Union to the end of the 1960s.5 It was then that the three-tiered edifice known collectively as the Russian Mafia began to take shape. As indicated, the top level of this structure was occupied by high-level government and party bureaucrats. The second level consisted of underground or shadow economy participants who exploited their jobs or connections with the enterprises of the state-command economy for illicit gain. The shadow economy produced goods and services “off the books,” that is, outside the state-mandated production quotas, and the payment for these goods and services went into the pockets of these occupants of the second tier. On the bottom level were the profes- sional criminals who ran the various illegal activities such as drugs, gambling, prostitution, extortion, and so on.
Before the 1960s, the three levels of organized crime existed separately, and their paths rarely crossed. This changed when the traditional criminal world began to become intertwined with the economic or white-collar criminals of the shadow economy and with the party bureaucracy. According to Stephen Handelman’s account of the rise of the “comrade criminals” in Russia, “the black marketeers of the 1960s and 1970s crossed the line dividing the underworld and the state. They operated in easy and mutually profitable cooperation with Soviet bureaucrats.”6 This intertwining reflected the pervasive nature of corruption during the “period of stagnation” under Soviet leader Leonid Brezhnev (1964–82). Government and party officials left no stones unturned in seeking opportunities to line their pockets. One such opportunity was extorting money from the criminal world and the shad- ow economy in exchange for protecting their illegal operations. This complicated chain of organized crime worked its way from the bottom to the top of Soviet soci- ety. It ultimately included state finances, industry, trade, and the system of public services.7
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During the presidency of Mikhail Gorbachev (1985–91), private enterprise, in the form of cooperatives, was encouraged in the U.S.S.R. This was a dramatic shift from what had been the prevailing Soviet socialist model of the economy, in which most private enterprise was outlawed. Unfortunately, the people best positioned to take advantage of this new opportunity were the criminals, the underground producers, and the bureaucrats who collaborated with them. These collaborators knew how to make money and had all the necessary connections to conduct business successfully, and the new policy enabled them to start to operate more openly. Toward the end of the Gorbachev period, when there were unmistakable signs that the Soviet Union was about to implode, the insiders—high-level officials in the central and regional headquarters of the Communist Party—began quietly to siphon off Party funds into banks, trading companies, and export-import firms, to position themselves to take advantage of what was expected to be a new economic era.8 This was a classic case of trading political advantage for economic advantage. By the late 1980s, corruption had reached such high levels that it was, for example, possible for any criminal to bribe his way out of any lawbreaking problem. The result of this combination of the “theft of the state” and the corruption was a massive increase in lawlessness and the rise of a new type of organized crime that has since permeated nearly every level of society in the former Soviet Union.
POLITICAL AND ECONOMIC LINKAGES The privatization of state property that began in Russia in 1992—when public prop- erty began to be sold to private investors—both expanded and solidified the complex relationship that had developed between the state and organized crime. Because of its connections to officialdom and to the shadow economy, organized crime took part in what has become the enormously lucrative scheme of privatization. As a result, the assets controlled by organized crime give it enormous economic power, and hence political power as well. These assets enable criminal organizations (in various guises) to deal directly with the state—on behalf of their own economic interests—from a position of parity. Organized crime has also attempted to assume certain governmen- tal functions, such as dividing territories among competing economic actors and reg- ulating business markets.9 It seeks to control business-market entry, to impose taxes (protection fees), to set up tariffs, and—as is characteristic of organized crime in the United States—to enforce all this through direct violence or other forms of coercion. It is the latter activities that have laid the groundwork for direct conflict with the state, because only the state can legitimately use violence. This series of develop- ments is as much political and economic as it is criminological, and it is unlike anything we have ever seen in the United States.
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Organized crime in Russia uses legal businesses as fronts for illegal activities and for setting up illegal product lines.10 It creates “political clans” to exercise political power and seeks to create and regulate markets to exercise economic power. The following are some specific characteristics of Russian organized crime in the post- Soviet era: